The veteran fund manager Anthony Bolton has admitted that he may have been caught out by Chinese fraudsters. His Fidelity China Special Situations fund has lost money in two investments in companies that have been accused of fraud.

The fund was launched with some fanfare last year but has struggled to produce the kind of sparkling returns Mr Bolton was previously associated with. His UK Special Situations fund consistently outperformed the market for almost three decades. But since the turn of the year his China fund's share price has declined around 15 per cent.

Fidelity confirmed yesterday that Mr Bolton had liquidated holdings in several Chinese reverse merger stocks at a loss, including in two companies accused of fraud.

China Integrated Energy, one of the firms, lost 90 per cent of its market value this year after being accused of fraud by short-sellers. Its auditor KPMG resigned but the Nasdaq-listed company has denied the allegations.

The fund manager refused to name the other company but admittedthe setback has forced the team to spend more time on due diligence.

Speaking about his investments, Mr Bolton told the Financial Times in Hong Kong yesterday that "the fact that it is a controversial area is an attraction. It is a bit like looking for gold in a minefield".

However, he is not the first big name to be caught out by potentially questionable Chinese firms. Last month, the $37bn hedge fund controlled by John Paulson was hit by a 80 per cent drop in value of Toronto-listed Sino Forest, in which it was the biggest shareholder. The Chinese-owned firm was accused of overstating its assets and sales.